More often than not, entrepreneurs believe that they will never be involved in a transnational dispute—even if they are doing business with a foreign counterpart. Perhaps this is the case because they think that the scenario is only for multi-million dollar businesses. Well, that’s just not the case because today, in a global economy, all nature and size of Latin American businesses may at some time or other find that transnational litigation is a reality, particularly when it becomes necessary to collect money or goods that are owed to them by someone in a foreign country.
The vehicle they will use to collect on a debt is recognized globally as a “monetary judgment.” If the debtor’s assets are in a foreign country, recovering a foreign monetary judgment can be an adventure; one that the entrepreneur will not want to take on without competent legal counsel. Although there are variations, essentially, there are at least two procedural steps involved in most foreign monetary judgments: (i) the recognition of the foreign judgment and (ii) its enforcement.
Recognition of Foreign Monetary Judgments
The «recognition» of a foreign judgment occurs when the court of one country or jurisdiction accepts a judicial decision made by the courts of another country or jurisdiction, and issues a judgment in substantially identical terms without rehearing the substance of the original lawsuit. In the absence of a governing international treaty, the recognition of a foreign monetary judgment will be determined in accordance with the requirements prescribed by the law of the «foreign» country where the debtor and assets are located.
In the United States, a foreign judgment can mean either a judgment from another state in the United States or from a foreign country. To differentiate between the two, the U.S. applies the term «foreign-country judgment» to judgments from another country. The law of each state governs all monetary judgments, however, many states use a version of the U.S. Uniform Foreign Money-Judgments Recognition Act, which has helped to harmonize, in large part, the standards for the recognition of monetary and foreign-country monetary judgments.
In addition, it is important to note that some countries have diplomatic reciprocity agreements. Reciprocity implies that there is an agreement to enforce in its own territory a judgment of similar nature issued by the foreign country. Further, some countries, including certain states in the U.S., will unilaterally enforce the foreign-country judgment without proof of diplomatic reciprocity, either under judge-made law or under specific statutes, referred to as comity.
Finally, if the country that issued the judgment and the country where recognition is sought are not parties to the Hague Convention on Foreign Judgments in Civil and Commercial Matters or other similar treaties and conventions, most courts will accept jurisdiction to hear cases for both the recognition and enforcement of judgments awarded by the courts of another country. This is particularly the case if the defendant and/or relevant assets are physically located within their territorial boundaries.
In general, beyond the recognition of foreign monetary judgments, the established requirements include (i) jurisdiction, (ii) service of process, (iii) no breach of principles of public policy, and (iv) final judgment.
The lack of jurisdiction is the most commonly used defense to oppose the enforcement of a foreign monetary judgment, but countries apply different criteria to determine compliance. Some countries, for example, require demonstration that their courts would have had jurisdiction over the subject matter under its own procedural rules. On the contrary, other countries will simply refrain from enforcing a foreign monetary judgment where such foreign country would have had jurisdiction over the dispute. Similarly, some countries will not enforce foreign monetary judgments resolving issues or disputes that are under its exclusive jurisdiction; for instance, where exclusive jurisdiction exists to resolve disputes about real estate located within the country. Finally, some countries require that debtor judgments be submitted, expressly or implicitly, to the jurisdiction of the country of origin.
Service of Process
The judgment’s creditor must carefully review the requirements of the service of process established by the foreign country where the debtor is located, and/or the requirements of the Hague Convention related to notification or transfer abroad of judicial and extrajudicial documents in civil or trade matters, where such treaties or conventions are in force.
No Violation of Public Policy
As mentioned above, a well-established principle of the recognition of foreign monetary judgments is that the courts of the foreign country will not review that judgment on its merits. Consequently, foreign monetary judgments might be recognized even if the courts of that foreign country had resolved the issue differently. However, this principle has limits. It is generally expected that courts will refuse to recognize a foreign monetary judgment when it is contrary to its public policy, noting that in some countries public policy refers to situations that clearly affect the health and public morals, as well as the confidence in the administration of law and respect for individual rights, personal freedoms, and private property.
Final and Conclusive Judgment
Finally, most countries will require a final and conclusive foreign monetary judgment. The validity of the judgment is determined under the law of the country of origin. The foreign judgment is conclusive where it grants or denies recovery of a sum of money, and is definitive if under the legislation of the country of origin there are no available legal remedies or pending appeals.
Because an action to enforce a foreign judgment is a comparatively cumbersome process, entrepreneurs who perform transnational business should seek legal advice before filing a lawsuit in their home countries against their foreign counterparts. Diaz, Reus & Targ LLP has extensive experience and knowledge in the recognition of foreign judgments in Latin America and in the United States, and has a team of trained professionals to advise clients in a full range of transnational disputes.